Common Reporting Standard


What is CRS?

CRS (Common Reporting Standard) is modeled upon FATCA a standard of international tax information exchange developed by OECD as adopted by ca. 100 countries worldwide including Poland and other European Union member states. CRS was implemented into the Polish legal system by the Act of 9 March 2017 on exchange of tax information with other countries (the CRS Act) with effect from 1 May 2017.

The CRS Act imposed, upon financial institutions (including, inter alia, banks, brokerage houses, investment funds), duties connected with identification of tax residence of their clients (both consumers and entrepreneurs) and accounts, maintained in their favour, subject to reporting duty to tax authorities (due diligence procedures and reporting duties).


Requirements connected with CRS

The CRS Act obliged financial institutions (including Bank Millennium S.A.) to:

  • Apply due diligence procedures in the area of verification of financial accounts in the meaning of the said Act and subject to reporting to tax authorities;
  • Apply specific reporting procedures (format of CRS-1 information on reported and not documented accounts delivered by financial institutions is published on the Ministry of Finance web site;
  • Register actions undertaken within performance of the above duties;
  • Gather documentation linked with the above process including, primarily, as follows: declarations of tax residence of account holders and controlling persons, official documents delivered (including, inter alia, tax residence certificates, identification documents and business entity registration documents).

 
The CRS Act also imposed duties upon Clients including, inter alia, as follows:

  • Account holders and in case of certain entities also persons controlling them who are beneficial owners relative to such entities have the duty to submit tax residence declarations and present financial institutions with documents referred to in the CRS Act when, inter alia, opening current accounts, term deposits, securities accounts.
  • Account holders have the duty to inform financial institution on any change of circumstances having impact upon his/her tax residence (e.g. change of domicile address, country) within 30 days from such change and submit, to the financial institution, declaration updated accordingly within 30 days from such change.

 
It is necessary to underscore that according to the CRS Act, financial institutions in Poland (including Bank Millennium S.A.) have the duty to deliver, to the tax authorities, client account information in case they are not able to identify country of tax residence (the so-called not documented accounts).


Determination of tax residence according to CRS

In cases of individuals including sole traders, professionals and farmers tax residence is determined on the basis of, as follows:

  • Country of domicile (other than Poland and the U.S., the residents of which are subject to FATCA regime),
  • Country of the address for correspondence (other than Poland and the U.S.),
  • Foreign telephone number as provided by the Client (except for telephone number in the U.S.),
  • Domicile address of the proxy established to the account (in case of an address other than Poland and the U.S.)

 
With respect to business entities:

  • Place where business has obtained legal capacity (other than Poland and the U.S.),
  • Place of registration (other than Poland and the U.S.),
  • Address for correspondence (other than Poland and the U.S.),
  • Head office location (other than Poland and the U.S.),
  • Country of controlling persons/beneficiary owners (other than Poland and the U.S.).

 
Meeting requirements of tax residence in countries other than Poland and the U.S. will cause the account to be deemed to be a reported account to tax authorities in CRS-1 Information.

The scope of information delivered to tax authorities in the CRS-1 Information and due date for delivery thereof by financial institutions is provided for in art. 34-36 of the CRS Act. According to the said provisions the scope of data to be reported incorporates, as follows:

  • Name and surname, date and place of birth in case of an individual, name, address, country or countries of residence and NIP (taxpayer identification numer) of a reported person – account holder, and in case of account held by entity identified as an entity controlled by at least one controlling person who is a reported person – name, address, country or countries of residence, entity’s NIP, and the name and surname, address, country or countries of residence, NIP and date and place of birth of such controlling person;
  • Account number or its functional equivalent in case there is no such number;
  • Account balance or value and in case of monetary insurance agreement or annuity agreement – monetary value of repurchase value established as at the end of calendar year, for which information is delivered, or information on closing of an account within the calendar year, for which information is delivered.

 
In case of escrow account:

  • Total gross amount of interest, total gross amount of dividend and total gross amount of other income generated in connection with assets held on the account paid into the account or credited to the account in a calendar year,
  • Total gross amount of sales revenue or redemption of financial assets paid in or credited on the account in a calendar year, relative to which reporting financial institution performed a function of a trustee, broker, proxy or other representative acting to the account of the account holder.

 
In case of deposit account:

  • Total gross amount of interest paid or credited to the account in a calendar year


Client classification according to CRS

The CRS Act provides for a specific institutional client classification scheme (i.e. business entities, except for sole traders). Conditional upon determined classification accounts held by clients will be or will not be subject to reporting.

ACTIVE NON-FINANCIAL ENTITY (NFE)

Active NFE – means an entity meeting one of the criteria listed below:

  • Less than 50% of gross income for the previous calendar year is a passive income* (described below), and less than 50% of assets held are assets generating passive income,
  • Is a company in organisation (i.e. does not perform and did not perform any business activity earlier but invests its capital in order to carry out business operation other than that of a financial institution),
  • Has not been a financial institution for the last five years and is under liquidation or re-organisation and will not perform financial institution business,
  • Mainly deals in execution of financial or hedging transactions with affiliated entities which are not financial institutions or to their benefit and does not finance or does not execute such transactions for any entity which is not affiliated with it, provided that the group of these entities conducts business other than the business of financial institution,
  • Is an entity which meets, jointly, all the criteria listed below:
  • was established and is manager in its country of residence solely for the following purposes: religious, charity, scientific, artistic, cultural, sports or educational and, if operating as occupational organisation, organisation of entrepreneurs, chamber of commerce, agricultural or horticultural organization, civic organization or organization managed solely to support social care,
  • is income tax exempt in its country of residence,
  • has no shareholders or members who are owners or beneficiaries of its income or assets,
  • relevant regulation of a country or its incorporation documents do not allow to transfer income or assets to any private person or entity who is not a charity entity unless, according to entity’s charity activities, it is a payment for acquired assets or compensation for services rendered,
  • relevant regulation of a country or its incorporation documents require that in case of such entity’s liquidation or dissolution assets will be transferred to Government entity or public utility organization or will be assigned to the Government.

 
Passive income means:

  • Income from dividend and share in profits of legal entities,
  • Income from interest and benefits from all types of loans, sureties and guarantees,
  • Income from disposal of securities, shares/equities, receivables,
  • Income from copyright, industrial property rights including from disposal of such rights,
  • Income from disposal and exercise of rights under financial instruments.

 

ACTIVE NFE NOT SUBJECT TO REPORTING

Active NFE not subject to reporting – means following and strictly defined entities:

  • central bank,
  • international organisation,
  • government entity,
  • stock exchange listed entity,
  • entity affiliated with stock exchange listed entity.

 

PASSIVE NFE

Passive NFE - means any non-financial entity which is not an Active NFE.

 

PASSIVE NFE – INVESTING ENTITY WHICH IS NOT A FINANCIAL INSTITUTION FROM A PARTICIPATING STATE

Passive NFE - investing entity which is not a financial intitution from a participating state - means an entity which is an investing entity and not a financial institution from participating state whose gross income originate, primarily, from investments or re-investments of financial assets and from trading in such assets, provided that it is managed by another entity who is a financial institution i.e. deposit, custodial institution, insurance firm or investing entity.

 

FINANCIAL INSTITUTION

Financial institution means the following types of institution:

  • custodial (entity whose significant part of activity incorporates safekeeping of financial assets on behalf of other persons i.e. activity generating gross revenue accounting for at least 20% of gross revenue of company within the period of three years ending on 31 December or the last accounting year (if not identical) preceding the year in which the said share is established or during the life of the entity whichever is shorter;
  • depositary (entity accepting deposits within the framework of their banking or similar activity, including domestic bank, foreign bank, foreign branch of a domestic bank and branch of a foreign bank, credit institution, branch of credit institution, SKOK and National SKOK);
  • investing entity (entity with core business – within business operation – involves at least one of the activities or operations listed below to the benefit or on behalf of other persons: trading in currency, trading in money market instruments, cheques, promissory notes, certificates of deposit, derivative instruments: FX, interest rate instruments and indexed derivative instruments, trading in marketable securities or commodity contracts of futures type, management of individual and collective asset portfolios, other forms of investing, administration or management of financial assets or monies on behalf of other persons or whose gross revenues are generated, primarily, from investing or re-investing of financial assets and trading in such assets provided that it is managed by other entity who is a financial institution: depositary, custodial, insurance firm or an investing entity);
  • insurance firm (domestic insurance firm or foreign insurance firm in the meaning of the Act of 11.09.2015 on insurance and re-insurance activities, concluding monetary insurance agreements or annuity (pension) agreement or is obliged to make payments under such agreements).


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